Uncle Sam ready to bankroll banks

Bush claims it'll help 'preserve' free market.

Bush claims it'll help 'preserve' free market.

October 15, 2008

WASHINGTON (AP) -- Big banks started falling in line Tuesday behind a rejiggered bailout plan that will have the government forking over as much as $250 billion in exchange for partial ownership -- putting the world's bastion of capitalism and free markets squarely in the banking business. Some early signs were hopeful for the latest in a flurry of radical efforts to save the nation's financial system: Credit was a bit easier to come by. And stocks were down but not alarmingly so after Monday's leap. The new plan, President Bush declared, is "not intended to take over the free market but to preserve it." It's all about cash and confidence and convincing banks to lend money more freely again. Those are all critical ingredients to getting financial markets to function more normally and reviving the economy. The big question: Will it work? Initially the U.S. government will pour $125 billion into nine major banks with the hope that they will use the money to rebuild their reserves and to increase lending to consumers and businesses. Another $125 billion will be made available this year to other banks -- if they need it -- for cash infusions. In return, the government will get ownership stakes in the financial institutions. Banks, meanwhile, will have to accept limitations on executives' compensation.